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In Re: David B. Ramsey and Donna R. Ramsey v. David B. Ramsey; Donna R.


August 3, 2012


Appeal from the United States Bankruptcy Court for the District of Idaho Honorable Terry L. Myers, Bankruptcy Judge, Presiding Bk. No. 11-00977-TLM



Argued and Submitted on June 14, 2012 at Boise, Idaho

Filed - August 3, 2012

Before: JURY, MARKELL AND HOLLOWELL, Bankruptcy Judges.

Chapter 7*fn2 trustee, Jeremy J. Gugino, appeals the bankruptcy court's order overruling his objection to the homestead exemption claimed by debtors, David and Donna Ramsey, in unimproved real property.

The trustee's objection raised the question whether debtors had the "actual intent" to make the unimproved real property their "homestead" within the meaning of Idaho Code § 55-1001(2). After an evidentiary hearing, the bankruptcy court ruled in favor of debtors and allowed their homestead. We AFFIRM.


On April 7, 2011, debtors filed their chapter 7 petition. Gugino was appointed the trustee.

In Schedule A, debtors listed real property located on Palmetto Drive in Eagle, Idaho (the "Palmetto Property") with a current value of $250,000 and encumbered by secured claims in the total amount of $394,184.63. They also listed an unimproved five acre lot located forty-five miles from Boise, Idaho (the "Elk Meadows Property") with a value of $37,000 and unencumbered. In Schedule C, debtors claimed the Elk Meadows Property exempt as their homestead under Idaho Code §§ 55-1001, 55-1102, and 55-1103.*fn3 Debtors' Statement of Intention showed that they would surrender the Palmetto Property.

2 The Trustee's Objection To Debtors' Homestead Exemption 3 On May 7, 2011, the trustee objected to debtors' exemption 4 on the grounds that they could not meet the "actual intent" 5 requirement to make the Elk Meadows Property their "homestead" 6 under Idaho Code § 55-1001(2).

The objection was based on 7 debtors' testimony at the § 341 meeting of creditors.*fn4 Debtors 8 testified that they planned on residing in the Palmetto Property 9 until it went into foreclosure and then rent a residence in 10 Boise until they could start building a house on the Elk Meadows 11 Property. The trustee argued that debtors' ability to build the 12 house was predicated on them finding work and receiving 13 financing to actually build the house. These plans, the trustee 14 asserted, were "too speculative" to demonstrate "actual intent".

15 Finally, the trustee pointed out that debtors had been trying to 16 sell the Elk Meadows Property off and on since 2009, which was 17 inconsistent with their professed intent to build a house and 18 make it their principal residence.

19 The Evidentiary Hearing 20 After further briefing from the parties, the bankruptcy 21 court held an evidentiary hearing on September 26, 2011, at 22 which debtors and their real estate agent, Vern Mathie, 23 testified.

24 Debtors' testimony can be summarized as follows:

In 2002, debtors purchased the Palmetto Property and had been living in the house continuously ever since. In December 2 2005, debtors purchased the Elk Meadows Property. At that time, 3 debtors were gainfully employed and their plan was to pay off 4 the mortgages on both properties and then build a vacation home 5 on the Elk Meadows Property.

6 The Elk Meadows Property had utilities (electric and 7 telephone), road access, and was subject to CC&R's. At some 8 point, debtors began the process of having a builder draw up 9 house plans. They also requested a variance from the Elk 10 Meadows CC&R's to set the house closer to the road, which was 11 granted in 2006.

12 In 2009, debtors' income became unstable and the Palmetto 13 Property required substantial repairs. As a result, debtors 14 listed the Elk Meadows Property for sale with two different real 15 estate agents in 2009 and 2010.

16 In 2010 debtors lost their jobs. Thereafter, they 17 collected unemployment and struggled to make the mortgage 18 payments on the Palmetto Property which totaled $3100 per month. 19 They drew down on IRA and pension money to make their payments. 20 In January 2011, debtors obtained the house plans for the 21 Elk Meadows Property, which were admitted into evidence. 22 Debtors estimated that it would cost between $165,000 and 23 $175,000 to build the house.

On March 15, 2011, debtors requested their real estate 25 agent, Vern Mathis, to add to the MLS listing that debtors would 26 be willing to carry a note on the Elk Meadows Property. 27 In early to mid-March 2011, debtors decided to allow the 28 Palmetto Property to go into foreclosure. At that same time, 1 they also decided to declare the Elk Meadows Property as their 2 permanent residence. As a result, they recorded a declaration 3 abandoning their automatic homestead in the Palmetto Property on 4 March 21, 2011. On the same day, they recorded a declaration of 5 homestead and non-abandonment with respect to the Elk Meadows 6 Property. A few weeks later, debtors filed their chapter 7 7 petition. At the time of their filing, Debtors did not have 8 financing lined up to build the house on the Elk Meadows 9 Property nor did they have specific plans for when they would 10 start construction.

11 Debtors also testified that when the Palmetto Property was 12 foreclosed upon, they would live and work in Boise. Boise is 13 approximately forty-five miles from the Elk Meadows Property. 14 Mr. Mathis then testified. He stated that the Elk Meadows 15 Property had no improvements and that no construction of any 16 kind had taken place on the property. He further testified that 17 on March 15, 2011, debtors had asked him to make changes to the 18 MLS listing to carry back a note on the property to facilitate a 19 sale. According to Mr. Mathis, three days later, on March 18, 20 2011, debtors cancelled the listing. Finally, Mr. Mathis opined 21 that construction loans were very difficult to arrange.

At the end of the hearing, debtors' counsel stipulated with 23 the trustee that he met with debtors on March 17, 2011. 24 In closing argument, the trustee urged the bankruptcy court 25 to adopt objective factors for determining what constitutes 26 "actual intent" under Idaho exemption law with respect to 27 unimproved property. Those factors, the trustee argued, should 28 require a debtor to show that he or she has concrete plans to 1 construct and occupy a house on the unimproved property as well 2 as the financial means to do so. The bankruptcy court took the 3 matter under advisement.

The Bankruptcy Court's Ruling

On October 4, 2011, the court issued its findings of fact 6 and conclusions of law in an oral decision. In making its 7 decision, the bankruptcy court set forth the following general 8 standards applicable to deciding the issue of intent:

9 (1) Idaho's exemption laws are to be construed liberally in 10 favor of debtors; (2) the trustee, as the party objecting to 11 debtors' exemption, had the burden of proof and the ultimate 12 burden of persuasion; (3) exemptions are determined as of the 13 bankruptcy filing date; and (4) the question of debtors' intent 14 is a factual one that can be proven by direct or circumstantial 15 evidence. With respect to this later point, the bankruptcy 16 court recited the evidence it considered in making its decision.

For the trustee:

(1) debtors listed the Elk Meadows Property for sale multiple times and even eventually as recently as 19 March 2011, one month before they filed their petition; (2) debtors continued to reside in the Palmetto 21 Property and expressed an intention to stay there until foreclosure; (3) debtors never commenced construction of a home on 23 the Elk Meadows Property despite the length of their ownership; 24 (4) debtors did not have the financial ability to 25 build a home; 26 (5) assuming debtors would secure jobs in Boise, debtors would double their commute time by living on 27 the Elk Meadows Property; and 28 (6) debtors cancelled the listing on the Elk Meadows 1 Property and filed their homestead declaration just days after meeting with their bankruptcy attorney.

For the debtors:

(1) debtors professed their intent to reside on the 4 Elk Meadows Property in the future through the filing of their declaration of homestead; 5 (2) debtors offered the January 2011 house plans into 6 evidence as well as the variance they secured for the property; (3) debtors' testimony indicated that at the time they 8 filed their petition, they knew they would not be able to stay permanently in the Palmetto Property and that 9 they intended to eventually build a home on the Elk Meadows Property.

11 The court gave weight to the fact that debtors' Statement 12 of Intention filed with their petition corroborated their 13 testimony to surrender the Palmetto Property. In addition, the 14 bankruptcy court found that debtors' decision to abandon the 15 Palmetto Property as their homestead and establish the Elk 16 Meadows Property as their homestead was due to their changing 17 circumstances, which culminated in discussions with their 18 bankruptcy attorney. The court decided that those discussions, 19 which occurred on the eve bankruptcy, were not sufficient 20 grounds to impeach debtors' testimony. In the end, the court 21 found debtors' testimony credible.

22 Having received and evaluated the weight and credibility of 23 all the evidence offered by the parties, the bankruptcy court 24 found that the trustee had not met his burden of proof of 25 showing, by a preponderance of the evidence, that debtors lacked 26 the intent to make the Elk Meadows Property their homestead as 27 required under Idaho exemption law. 28 On the same day it issued its oral ruling, the bankruptcy 1 court entered the order overruling the trustee's objection. The 2 trustee timely appealed.


The bankruptcy court had jurisdiction over this proceeding 5 under 28 U.S.C. §§ 1334 and 157(b)(2)(B). We have jurisdiction 6 under 28 U.S.C. § 158.


Whether the bankruptcy court erred in allowing debtors' 9 homestead exemption in the unimproved Elk Meadows Property.


11 We review questions of fact, such as the bankruptcy court's 12 ultimate decision regarding debtors' intent to make the Elk 13 Meadows Property their homestead, under the clearly erroneous 14 standard. Kelley v. Locke (In re Kelley), 300 B.R. 11, 16 (9th 15 Cir. BAP 2003). "A [factual] finding is clearly erroneous when 16 there is no evidence in the record supportive of it and also, 17 when, even though there is some evidence to support the finding, 18 the reviewing court, on review of the record, is left with a 19 definite and firm conviction that a mistake has been made in the 20 finding." United States v. Gypsum Co., 333 U.S. 364, 395 21 (1948). We affirm the bankruptcy court's factual findings 22 unless its interpretation of the facts was "illogical, 23 implausible, or without support in inferences that may be drawn 24 from the facts in the record." United States v. Hinkson, 25 585 F.3d 1247, 1261-62 & n.21 (9th Cir. 2009) (en banc).

26 We review a bankruptcy court's conclusions of law, 27 including its interpretation of state law, de novo. Hopkins v. 28 Cerchione (In re Cerchione), 414 B.R. 540, 545 (9th Cir. BAP 1 2009).


When debtors filed their chapter 7 petition, all of their 4 assets became "property of their bankruptcy estate under § 541, 5 subject to their right to reclaim certain property as exempt." 6 Schwab v. Reilly, __ U.S. __, 130 S.Ct. 2652, 2656-58 (2010). 7 "Property a debtor claims as exempt will be excluded from the 8 bankruptcy estate '[u]nless a party in interest' objects." Id. 9 (citing § 522(l)). Whether property qualifies as exempt is to 10 be determined as of the date of the filing of debtors' chapter 7 11 petition. White v. Stump, 266 U.S. 310, 313 (1924); In re 12 Cerchione, 414 B.R. at 548.

13 Section 522(b) allows debtors to choose the exemptions 14 afforded by state law or the federal exemptions listed under 15 § 522(d). Idaho has elected to "opt out" of the federal 16 exemptions. Idaho Code § 11-609. Therefore, debtors were 17 limited to the exemptions allowed under Idaho state law. In re 18 Steinmetz, 261 B.R. 32, 33 (Bankr. D. Idaho 2001). Idaho 19 exemption statutes are to be liberally construed in favor of the 20 debtor. Id.

In Idaho, the homestead can be established automatically by 22 occupying a home as one's principal residence or by recording a 23 proper declaration of homestead. Idaho Code § 55-1004. To 24 claim a homestead exemption in bare land or improved property 25 which he or she does not yet occupy, the debtor must record a 26 proper declaration. Idaho Code § 55-1004(2). In the case of a 27 debtor who owns more than one parcel of property and who desires 28 to claim a homestead exemption in a parcel he or she does not 1 yet occupy, the debtor must execute and record two different 2 declarations: a declaration of homestead as to the unoccupied 3 property, and a declaration of abandonment as to the occupied 4 property.

5 The trustee does not dispute that debtors complied with the 6 technical requirements for declaring a homestead with respect to 7 the Elk Meadows Property and abandoning their automatic 8 homestead in the Palmetto Property. Rather, the trustee asserts 9 that to prove they "actually intended" to make the Elk Meadows 10 Property their homestead within the meaning of Idaho Code § 55- 11 1001(2), debtors need more than a mere declaration of homestead.

Idaho Code § 55-1001(2) states:

"Homestead" means and consists of the dwelling house or the mobile home in which the owner resides or 14 intends to reside, with appurtenant buildings, and the land on which the same are situated and by which the 15 same are surrounded, or improved; or unimproved land owned with the intention of placing a house or mobile 16 home thereon and residing thereon . . . . Property included in the homestead must be actually intended or 17 used as a principal home for the owner.

18 According to the trustee, proof of "actual intent" under the 19 statute should require evidence of objective criteria such as a 20 debtor's concrete plans to build a house on the bare land within 21 a reasonable amount of time and the financial ability to do so. 22 However, the plain language of the "homestead" definition does 23 not include conditions regarding timing, financial ability, or 24 otherwise. In re Conley, 1999 WL 33490228, at *12 (Bankr. D. 25 Idaho 2001) ("The statute requires only that, in addition to an 26 intent to reside, the debtor own or be purchasing the property 27 and, thus, have a present interest in such property.").

Although the Idaho Supreme Court has not provided guidance on 1 the intent requirement, numerous decisions by bankruptcy courts 2 and this Panel fill that gap.

3 Generally, determining a debtor's intent to establish a 4 homestead on property is a factually intensive endeavor. See 5 In re Kelley, 300 B.R. at 16; In re Moore, 269 B.R. 864, 868 6 (Bankr. D. Idaho 2001); In re Conley, 1999 WL 33490228, at *12 7 (Bankr. D. Idaho 2001) (finding that the debtor's decade long 8 litigation concerning the unimproved property was indicative of 9 his subjective intent to make the property his homestead). As 10 the trier of fact, the bankruptcy court had to determine which 11 witnesses it found credible, which of the permissible competing 12 inferences it would draw, and ultimately whether the party with 13 the burden of persuasion -- here the trustee -- had persuaded it 14 that the requisite facts showing intent or lack thereof were 15 proven.

16 We have no doubt that the bankruptcy court performed this 17 function properly. The bankruptcy court summarized the evidence 18 in support of the trustee's position and debtors' countervailing 19 evidence that it considered. The court explicitly credited 20 debtors' testimony and permissibly drew inferences from their 21 testimony and documentary evidence (house plans, the variance 22 from the CC&R's, and their Statement of Intention). "When 23 factual findings are based on determinations regarding the 24 credibility of witnesses, we give great deference to [those] 25 findings." Wolfe v. Jacobsen (In re Jacobsen), 676 F.3d 1193, 26 1201 (9th Cir. 2012).

Despite the factual questions raised by the trustee as to 28 whether debtors could reasonably expect to occupy the Elk 1 Meadows Property, we conclude that the bankruptcy court did not 2 clearly err in finding that debtors' had the actual intent to 3 make the Elk Meadows Property their homestead. The record as a 4 whole, particularly in light of the credibility finding, 5 supports the bankruptcy court's inferences and findings. "Where 6 there are two permissible views of the evidence, the 7 factfinder's choice between them cannot be clearly erroneous." 8 Anderson v. City of Bessemer City, N.A., 470 U.S. 564, 574-75 9 (1985).

10 In light of our conclusion, it is unnecessary for us to 11 conduct an exhaustive review of non-binding case law 12 interpreting other state's homestead exemption laws. Suffice it 13 to say that we are not persuaded by the bankruptcy court's 14 reasoning in In re Roberts, 280 B.R. 540 (Bankr. D. Mass. 2001). 15 Extrapolating from case law that recognizes the constructive 16 occupancy exception, the Roberts court held that "to establish 17 the requisite intent, a debtor must demonstrate that the future 18 occupancy is in the near future and is capable of measurement 19 given whatever steps a debtor must take to achieve occupancy.

A 20 declaration of interest alone is insufficient." Id. at 546. 21 In those jurisdictions that recognize constructive 22 occupancy, the underlying homestead statute has been construed 23 to require actual occupancy. As a result, to avoid harsh 24 results, the courts have fashioned a narrow exception that 25 requires a manifestation of the intent to occupy the land as a 26 homestead, and actual occupation within a reasonable time 27 thereafter. In re Roberts, 280 B.R. at 545 (citing In re 28 Schissler, 250 B.R. 697, 700 (Bankr. W. D. Mo. 2000)); Sec. 1 State Bank of Scott City v. Coberly, 623 P.2d 544, 545 (Kan. Ct. 2 App. 1981); and Brodsky v. Maloney, 105 N.W.2d 911, 913 (S.D. 3 1960). The constructive occupancy exception and its requirement 4 of actual occupation within a reasonable time make sense in the 5 context of those cases. However, under Idaho law, physical 6 presence on undeveloped land is immaterial to a homestead by 7 declaration under Idaho Code § 55-1004(2). In re Conley, 1999 8 WL 33490228, at *11.


Having found no error of fact or law, we AFFIRM.

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